Financial giant liable for independent advisor's fraud, rules court

Financial giant liable for independent advisor's fraud, rules court

A Manitoba court decision against Great-West Life appears to put the kibosh on the perception that advisors acting as independent contractors are solely responsible for their fraud.

The financial giant has been ordered to pay $528,834 to a Winnipeg couple, who took the company to civil court after being bilked of more than $450,000 in retirement savings, between 1997 and 2006, by their former financial planner, Gary Palmer, a former independent agent for Great-West Lifeco Inc.

Michel and Lorraine Mignault claimed that Great-West Life was "vicariously liable" for Palmer’s actions, while the company argued that it was absolved from blame, as Palmer acted as an independent contractor. A Manitoba justice disagreed, saying Great West Life “cloaked (Palmer) with the attributions of apparent authority,” reported the Winnipeg Free Press on Thursday.

Palmer withdrew $458,789 in total from the Mignaults’ account. By the time they filed the lawsuit in 2006, their retirement savings had dwindled to less than $9,600. The couple had initially asked for $665,000, plus interest and $500,000 in punitive damages. The justice did not feel Great West Life was responsible for punitive damages.

Palmer was convicted in November 2010 of defrauding 23 people and theft of $1.5 million over a decade. He was sentenced to eight years in prison.

Great West Life plans to appeal the decision said a company spokesperson interviewed by the Winnipeg Free Press.

A sign of things to come? At the end of the day there are very few true "Independent Financial Advisors" in this country. Majority have a direct contract with a parent company that controls what they can and can't say. Good for a judge for stepping up and taking a stand for the couple who lost their assets.

Ethical behavior is the agents/advisors responsibility. Corporations are blind as long as their interest is served. This is an example of the elimination of professional and moral standards where the product provider and the independent contractor have different goals and responsibility, instead of a much stronger ,closer relationship that we once had with our providers. The consumer must learn to shop for a salesperson or advisor before just accepting they are identified with a recognized corporate name.